An asset sale by Firestar Diamonds, which has filed for bankruptcy in the US, is a setback for Punjab National Bank which fears that a truncated sale will limit recovery in the PNB fraud case
Mumbai/Bengaluru: A US bankruptcy court on 29 March allowed Nirav Modi’s Firestar Diamonds and other related companies to sell their assets.
The court has invited bids for assets of the distressed companies till 27 April and auction of the assets will begin on 5 May.
This may come as a setback to Punjab National Bank (PNB), which in a hearing on 28 March had opposed the sale on the ground that a truncated sale will limit the recovery of creditors.
An email sent to a spokesperson for PNB was not answered till the time of publishing this story.
PNB, which is facing a liability of Rs12,636 crore because of the alleged fraud by Nirav Modi and Mehul Choksi firms, had told the court that Modi's firms have not provided information that any of the assets to be sold were obtained with funds fraudulently obtained from PNB or whether the debtors were otherwise used to launder funds.
"The Court having conducted a hearing on 28 March 2018, at which time the Court considered, among other things, the bidding procedures, any objections thereto and the oral arguments of counsel; and it further appearing that the relief requested is reasonable and necessary to protect the interests of the debtors, their estates, and creditors," the court said in the order dated 29 March.
The court also ruled that the distressed companies have demonstrated sufficient business reasons for the court to approve the bidding and auction of its assets.
The court will conduct the sale hearing on 15 May.
While the court did not rule in favour of PNB's objections, the public sector bank can again submit its objections before the sale hearing till 8 May.
Firestar group of companies will have time till 11 May to reply to objections.
On 26 February, Firestar Diamond and two affiliates (Fantasy Inc. and A. Jaffe Inc.) filed for bankruptcy protection in the US through a voluntary petition, stating supply chain disruption. Incidentally, the companies have not mentioned PNB as one of its creditors in the bankruptcy petitions.
These firms had asked the court to approve an aggressive sales and bidding process before an important jewellery industry trade show, JCK. The show is being held during 1-4 June 2018 in Las Vegas.
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